Pacific Crest analyst Chad Bartlev this morning cut his 2012 forecast for Kindle e-reader sales to 12.3 million units to 24 million, asserting that his latest checks find that Q1 Kindle component orders have fallen more than 75% from initial expectations in early January. “Visibility is extremely low, and orders could increase later this year around new devices, but our supply checks suggest 2012 volumes could be 50% lower than initially expected,” he writes.

Bartlev is keeping his forecast for the Kindle Fire tablet for this year at 14.9 million units, but he adds that “uncertainty has increased.” He says checks find that Kindle Fire component orders for Q1 have fallen about 11% since February. “In addition, component orders for the new 7- and 9-inch devices have yet to materialize,” he writes. “We believe there has been a slight delay in the new devices and that sales could be even more weighted to late 2012.

That is interesting, but it's meaningless as an isolated fact. Yes, it could mean problems for Amazon. It could mean that there has been a breakthrough on price/availability of pixel qi or mirasol or something else, and they are pushing for an early change of platforms. Perhaps they have seen the new Google Nexus Tablet and they are thinking of concentrating on apps instead of hardware? Perhaps estimates were just too high? There is always a number that is too high (you make more than you sell) no matter what your estimate is.

Another thought: As Kindle's move from book fanatics to mass market, I expect their sales pattern to change. This means a huge sales surge for Christmas and slower for every other season. As a result, they only need a trickle of current models and they need to begin working on whatever model they will sell next Christmas.

Exactly how credible is an article like this? Outside a few key people at Amazon no-one knows how many Kindles have been sold, how many have been produced, nor anticipated sales in the coming months. As far as we all know Amazon could have sold just 1,000 Kindles and paid a bunch of uni students to post on random forums about how much they love their Kindles (ok very extreme).

I agree, sales may slump with the Kindle, anyone who has one is less likely to upgrade, especially those who have a K3 as the new offerings whilst tempting aren't as big a jump from the K2. The release of the Kindle Fire may have had an impact, but financially less people have spare cash. By what negative impact this has, I do not know, but un-released figures being made up by people in an online article IMHO are meaningless.

1) If Amazon was seeing reducing demand in the US, I would have thought they would have expanded availability outside the US, rather than reducing orders. The Touch and Fire are still not available in the UK.

2) One reason they may not want to do that is if they are actually losing money on the hardware and the people buying the hardware are not buying as much Amazon supplied content as predicted so the business model is breaking down.

Of course this is all speculation based on speculative data.

I don't think any drop in demand is related to the economy, the record demand for the new iPad proves that people can find money for things they really want. I also don't expect Amazon to shift away from Hardware and more to Software. They want to build the same "walled garden" that Apple has, get people locked into the platform and the content so the device is "sticky" and hard to move away from. That's the primary reason I don't own a Fire, my multimedia content is in iTunes and Apple's cloud. There is just no compelling reason to move to the Fire that would drive me to switch clouds.

Exactly how credible is an article like this? Outside a few key people at Amazon no-one knows how many Kindles have been sold, how many have been produced, nor anticipated sales in the coming months.
...
By what negative impact this has, I do not know, but un-released figures being made up by people in an online article IMHO are meaningless.

I don't know how accurate the figures are for a certainty either, and I'm certainly not saying it's the death knell of the Kindle eco-system even if it is true (consider the people using the Kindle app on non-Kindle devices, for example).

My thoughts on this as someone who has watched the business behind the game console industry for a lot of years: these sort of "channel checks" are usually extremely accurate. What gives them credibility is that they're checking Amazon's orders for key components, components that they can't build a Kindle without, something that it's hard for Amazon to hide as people talk (and some of them are publicly traded companies that must, or simply want to, publish this info). The trick is in figuring out *why* they're accurate. Is it because they're "starving the distribution channel" in advance of a new model? Is it because demand is slowing? Is it because their business is suffering more seasonality than before? Have they overbought in previous quarters and inventory is building up to a level that Amazon's uncomfortable with?

The curious thing in all this is that the Kindle Touch has been released in only a handful of countries, and the Kindle Fire in only a single country. Surely if demand was softening in the U.S. it would be an opportunity to build up inventory for international launches for the Fire, and an opportunity to get the Kindle Touch into more than just the few markets it's in now, right?

So my guess is that one or more new models is coming. Any new models would apparently replace, rather than complement, the existing models as Amazon doesn't see value in bulking up on existing models. If this theory is correct, these new models would not necessarily even seem like a new model to the average consumer, they might simply be Touchs and Fires with redesigned internals that can be constructed less expensively than the current Touch and Fire; there may not be more power or new features along for the ride. Though there certainly could be more power and/or new features along for the ride, which is actually the more likely scenario.

If Amazon has the ability to build up inventory for international launches and chooses not to do so, then they're really taking international markets for granted (to their detriment, if you ask me) these days.

My thoughts on this as someone who has watched the business behind the game console industry for a lot of years: these sort of "channel checks" are usually extremely accurate. What gives them credibility is that they're checking Amazon's orders for key components, components that they can't build a Kindle without, something that it's hard for Amazon to hide as people talk (and some of them are publicly traded companies that must, or simply want to, publish this info). The trick is in figuring out *why* they're accurate. Is it because they're "starving the distribution channel" in advance of a new model? Is it because demand is slowing? Is it because their business is suffering more seasonality than before? Have they overbought in previous quarters and inventory is building up to a level that Amazon's uncomfortable with?

Quite an interesting point, I honestly hadn't thought of it that way.

Quote:

The curious thing in all this is that the Kindle Touch has been released in only a handful of countries, and the Kindle Fire in only a single country. Surely if demand was softening in the U.S. it would be an opportunity to build up inventory for international launches for the Fire, and an opportunity to get the Kindle Touch into more than just the few markets it's in now, right?

So my guess is that one or more new models is coming. Any new models would apparently replace, rather than complement, the existing models as Amazon doesn't see value in bulking up on existing models. If this theory is correct, these new models would not necessarily even seem like a new model to the average consumer, they might simply be Touchs and Fires with redesigned internals that can be constructed less expensively than the current Touch and Fire; there may not be more power or new features along for the ride. Though there certainly could be more power and/or new features along for the ride, which is actually the more likely scenario.

If Amazon has the ability to build up inventory for international launches and chooses not to do so, then they're really taking international markets for granted (to their detriment, if you ask me) these days.

The Kindle Touch is slowly being released internationally, and I personally think it has more to do with supply than demand. The Kindle Fire I imagine the real reason it hasn't gone internationally is because of licensing restrictions. Amazon has an android app store, but only available to US customers (this was implemented prior to the fire), and the streaming content of movie/tv shows may be highly restricted to the US.

I imagine once Amazon are able to sell streams of movies internationally they will sell the Fire. Content I personally believe is the reason for US-only sale of the Fire.

Could it simply be that they've made a fairly robust device, and offered little new in the recent models, so they are getting fewer upgrades (or purchases to replace faulty Kindles) and the sales are mainly new users?

I certainly have seen nothing that would make me reach into my pocket and upgrade/replace my DXG. Put out a new 9-10" e-ink device with the pearl screen & updated motherboard & software and I'll certainly consider it.

I think people were just holding out for the ipad, and like any company with foresight, Amazon probably expected sales to be affected by this and adjusted their orders accordingly?

That makes sense. And, if their supply ran out due to some surge in sales, they can spin that in the same way Apple does with the "Oh, we can barely keep them in stock, they're so popular!" since they (unlike Apple) tend to give pretty cryptic sales numbers, if at all.

Maybe the market for ereaders is simply becoming saturated. It's cheaper to buy used print books than ebooks...

It can be cheaper, especially in these days of agency, but I still buy them all as e-books just for the convenience.

That said, 100% of the people I know with e-readers got them in the last few months (myself included) so, while admittedly completely anecdotal, I don't have the sense that demand is peaking. Quite the opposite, I see demand piquing.

Though I do see consolidation occuring, with the big four (Kindle, Kobo, Nook, and Sony, in no particular order) consolidating their hold on device sales.

I suspect Amazon are also seeing diminishing returns and reduced revenue per device.

With each price drop they lower the barrier to entry to the world of e-readers, but I suspect that the newcomers also read correspondingly fewer books. if they read more they would have been with the early adopters. So the newer users are more casual, less frequent users. If that is the case, not only is Amazon getting less upfront revenue per device, but also less recurring revenue from book purchases. Maybe they have scooped up all the additional users attracted to the $79 price tag and won't see another large sales spike until they drop the price again?

I suspect Amazon are also seeing diminishing returns and reduced revenue per device.

That's an interesting point, and you make a strong case for it. It hasn't been my experience, or my girlfriends (she's bought 50 or so e-books since November, and I've bought hundreds since December), but I wouldn't be surprised if you were right despite all that.

I suspect Amazon are also seeing diminishing returns and reduced revenue per device.

With each price drop they lower the barrier to entry to the world of e-readers, but I suspect that the newcomers also read correspondingly fewer books. if they read more they would have been with the early adopters. So the newer users are more casual, less frequent users. If that is the case, not only is Amazon getting less upfront revenue per device, but also less recurring revenue from book purchases. Maybe they have scooped up all the additional users attracted to the $79 price tag and won't see another large sales spike until they drop the price again?

Reading fewer books doesn't necessarily correspond to buying fewer books. I read over a hundred books a year and spend less than someone buying 5 bestsellers a year.

You are assuming that the avid readers who were the early adopters of eReaders were purchasing tons of expensive books from Amazon and I'm not sure that's the case. Voracious readers are going to be more price sensitive and many probably put in the time to track down freebies and bargains or use the library or fill up their readers with classics or join lending groups or even scan their own books. People who read less than a book a month aren't going to bother with any of that and will just buy whatever is at the top of the bestseller list when they want a book.